The Cromulent Economics Blog

February 20, 2017

The U.S. job market continues to change

And there is not much anyone can do about it:

Roughly 163,000 oil jobs were lost nationally from the 2014 peak, or about 30 percent of the total, while oil prices plummeted, at one point by as much as 70 percent. The job losses just in Texas, the most productive oil-producing state, totaled 98,000.

Several thousand workers have come back to work in recent months as the price of oil has begun to rise again, but energy experts say that between a third and a half of the workers who lost their jobs are not returning. Many have migrated to construction or even jobs in renewable energy, like wind power. ...

Indeed, computers now direct drill bits that were once directed manually. The wireless technology taking hold across the oil patch allows a handful of geoscientists and engineers to monitor the drilling and completion of multiple wells at a time — onshore or miles out to sea — and supervise immediate fixes when something goes wrong, all without leaving their desks. It is a world where rigs walk on their own legs and sensors on wells alert headquarters to a leak or loss of pressure, reducing the need for a technician to check.

And despite all the lost workers, United States oil production is galloping upward, to nine million barrels a day from 8.6 million in September. Nationwide, with a bit more than one-third as many rigs operating as in 2014, production is not even down 10 percent from record levels.

Some of the best wells here in the Permian Basin that three years ago required an oil price of over $60 a barrel for an operator to break even now need about $35, well below the current price of about $53.

Much of the technology has been developed by the aviation and automotive industries, along with deepwater oil exploration, over more than a decade. But companies drilling on land were slow to adapt until oil prices crashed and companies needed to get efficient quickly or go out of business.

Getting rid of environmental regulations in the energy sector will have several effects. Environmental quality will get worse. Energy sector profits will rise and energy jobs will increase. But the small increase in energy jobs will not be able to compensate for the lost jobs that arise due to technological improvement.

Comments

The U.S. job market continues to change

And there is not much anyone can do about it:

Roughly 163,000 oil jobs were lost nationally from the 2014 peak, or about 30 percent of the total, while oil prices plummeted, at one point by as much as 70 percent. The job losses just in Texas, the most productive oil-producing state, totaled 98,000.

Several thousand workers have come back to work in recent months as the price of oil has begun to rise again, but energy experts say that between a third and a half of the workers who lost their jobs are not returning. Many have migrated to construction or even jobs in renewable energy, like wind power. ...

Indeed, computers now direct drill bits that were once directed manually. The wireless technology taking hold across the oil patch allows a handful of geoscientists and engineers to monitor the drilling and completion of multiple wells at a time — onshore or miles out to sea — and supervise immediate fixes when something goes wrong, all without leaving their desks. It is a world where rigs walk on their own legs and sensors on wells alert headquarters to a leak or loss of pressure, reducing the need for a technician to check.

And despite all the lost workers, United States oil production is galloping upward, to nine million barrels a day from 8.6 million in September. Nationwide, with a bit more than one-third as many rigs operating as in 2014, production is not even down 10 percent from record levels.

Some of the best wells here in the Permian Basin that three years ago required an oil price of over $60 a barrel for an operator to break even now need about $35, well below the current price of about $53.

Much of the technology has been developed by the aviation and automotive industries, along with deepwater oil exploration, over more than a decade. But companies drilling on land were slow to adapt until oil prices crashed and companies needed to get efficient quickly or go out of business.

Getting rid of environmental regulations in the energy sector will have several effects. Environmental quality will get worse. Energy sector profits will rise and energy jobs will increase. But the small increase in energy jobs will not be able to compensate for the lost jobs that arise due to technological improvement.

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